1. Field of the Invention
The present invention relates to exchange-traded equity securities, and particularly to a method and system for securitizing a physical commodity.
2. Description of Related Art
There are many barriers to owning certain commodities that have prevented investors from investing in the commodities, which, in turn, can lead to a less liquid and transparent market. Foreign currency (i.e., non-United States of America currency), for example, has historically had barriers to entry for individual investors. Barriers exist in both investing logistics and in cost. Most currency trading is done by banks and broker dealers, through spot transactions, forwards and foreign exchange swaps. The difficulty in understanding the logistics required in these transactions, as well as the fees for these transactions, have made foreign currency markets relatively inaccessible to individual investors and to smaller institutional investors as well. In addition, the foreign currency market is an over-the-counter market, lacking the transparency and economy of exchange-traded securities. The current fee structure for such foreign currency transactions is particularly disadvantageous to active traders.
Regardless of whether an investor is institutional or individual, there is no mechanism for investing in foreign currency that does not require the use of spot contracts, forwards or futures, which can be costly. The economy of scale required for investing on the level of larger U.S. banks and broker/dealers is out of reach for most individual investors.
Accordingly, there is no existing mechanism that facilitates trading in foreign currency, in such a way as to overcome these historical barriers.